Question

The following information was drawn from the annual report of Sierra Home Builders (SHB).

Required
a. Compute the percentage of growth in net income from 2016 to 2017. Can stockholders expect a similar increase between 2017 and 2018?
b. Assuming that SHB collected $264,000 cash from earnings (i.e., net income), explain how this money was spent in 2017.
c. Assuming that SHB experiences the same percentage of growth from 2017 to 2018 as it did from 2016 to 2017, determine the amount of income from continuing operations that the owners can expect to see on the 2018 income statement.
d. During 2018, SHB experienced a $60,000 loss due to storm damage (note that this would be shown as an extraordinary loss on the income statement). Liabilities and common stock were unchanged from 2017 to 2018. Use the information that you computed in Requirement c plus the additional information provided in the previous two sentences to prepare an income statement and balance sheet as of December 31, 2018.